credit

How can elderly protect their credit cards?

Janna HerronDear Credit Card Adviser,
At 75 years old and because I have little need today for credit cards or large amounts of credit, I would like to close my credit card accounts, but do not want my FICO score to be lowered.

Are there any protections for the elderly who want to protect themselves from hackers, crooks or even family members who use a parent's or grandparent's credit card without permission? I have had two credit cards compromised this past year and do not want to see it happen again.
-- Judy

Dear Judy,
How closing your credit cards affects your credit score largely depends on whether you have other active credit accounts, such as a mortgage or auto loan. If you don't, then closing your credit cards will not only hurt your FICO credit score, but will make it eventually disappear altogether.

Let me explain. To generate a FICO credit score, three factors are required. You must be alive. You must have one account that has been open and in use for at least six months. And, you must have one undisputed account that has been reported by a creditor to the credit bureaus in the past six months. This is all courtesy of Anthony Sprauve, the spokesman for myFICO.com, the consumer education division of FICO.

So, after six months of closing your credit card -- given you have no other active credit obligations -- you won't meet the basic requirements to have a FICO credit score.

If you have other credit accounts in good standing, the effect on your credit score won't be as pronounced. Your score could go down or stay the same depending on a host of factors, but FICO says closing accounts "rarely" helps a credit score.

My other question is: Do you need a credit score? If your mortgage and car are paid off and you have no use for credit cards, there's no need to worry about your credit unless you plan to apply for a loan in the future. It's a consideration given your age.

Lastly, fraud can occur on more than just existing credit card accounts. Fraudsters and family members alike can apply for credit cards in your name, using your personal information. They can rack up thousands of dollars in charges before you are the wiser. One way to deter this is by checking your credit reports every year to make sure each account is legit.

Every American is entitled to a free credit report from each bureau -- Equifax, Experian and TransUnion -- every 12 months under federal law. You can get yours at AnnualCreditReport.com.

But a better security measure that could be right for you, if you don't need to apply for any new credit, is a credit freeze on your credit report. This prevents new lenders from pulling your credit report and from reporting information about you to the credit bureaus. Only lenders with which you have an existing relationship can receive your credit report and report new payment information to the bureaus.

This means that if a criminal or dishonest grandchild wants to open a new credit card account under your name to fund some large-scale purchases, they won't be able to do it because the credit card company won't be able to pull your credit report to approve the application. The fraud can't occur because of the credit freeze.

Credit freezes aren't always free. Fees vary by state, but often run between $3 and $10. Colorado, Indiana, New Jersey, New York, North Carolina and South Carolina don't charge for freezes. Victims of identity theft usually can get the fee waived, and some states offer reduced fees or fee waivers for senior citizens. There is also another fee to unfreeze your credit report if you want to take out new credit. If you're interested, credit freeze requests can be made to the credit bureaus online, by phone or by mail.

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To ask a question of the Credit Card Adviser, go to the "Ask the Experts" page and select "Credit Cards." Read more columns by the Credit Card Adviser. Follow Janna Herron on Twitter.

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